Which one of the following would be considered a contingent liability?
A) A company owes $100,000 on inventories purchased on credit.
B) A company has $845,000 worth of bonds outstanding.
C) A company estimates that it will probably have to pay $1,200,000 to the Department of Environment Protection for a chemical spill.
D) The company has access to a line of credit with a bank in the amount of $1,500,000.
E) The company believes that it is reasonably possible it will lose a lawsuit but is unable to determine the possible damages.

Question

Quizplus · Accepted Answer

A contingent liability is a potential obligation that may occur depending on the outcome of a future event. In this case, the company estimates a probable payment for a chemical spill, which fits the definition of a contingent liability.

Which One of the Following Would Be Considered a Contingent